Electric Vehicles

[Barrels of Oil Equivalent Saved:]

1.5M

[Jobs Impact:]

Low

Medium

High

[ Budget Impact: ]

Low

Medium

High

[ Conventional Pollutants Reduced: ]

NOx

1,051 tons

PM

-240 tons

[ Megatons of GHG Reduced: ]

0.5

Overview

Some of America’s earliest vehicles were powered by electricity, before automakers moved toward internal combustion engines that relied on cheap and convenient petroleum fuels. Over a century later, combustion engine vehicles dominate the market and petroleum accounts for all but one-tenth of 1% of energy consumed by highway vehicles.1 However, the need for more sustainable transportation has led to a global resurgence of interest in the electric vehicle (EV). Many analysts now see increased U.S. market penetration of EVs as inevitable,2 especially given aggressive new fuel-efficiency and GHG emissions standards,3 continued volatility of oil prices,4 and the declining cost of battery technology.5 But like any new technology, EVs face several barriers to widespread adoption.

Analysis

Despite recent increases in domestic oil production, the U.S. still imports 3.8 billion barrels each year6 at a cost of $379 billion.7 Increasing the number of vehicles powered by domestically produced electricity would keep more energy investments and jobs within our borders. Under the right circumstances, EVs could also provide an economic benefit to purchasers—since charging an EV is already cheaper for drivers than fueling a traditional combustion engine vehicle.8 These savings will increase further if the price of gasoline rises and the price of battery technology continues to fall.9

While emissions vary based on the type of vehicle and the source of the power used for charging,10 the average EV produces 86% less NOx and 34% less greenhouse gas emissions per mile than the average combustion engine vehicle.11 EVs can help balance the intermittency of technologies like wind and solar power and reduce the cost of integrating them into the grid. Greater EV penetration would aid America’s transition to cleaner electricity sources.12

Some detractors claim that slow sales of “plug-in”13 EV models introduced in late 2010 indicate the failure of this technology.14 Yet the market history of hybrid vehicles offers a very different outlook. Led by the Toyota Prius, hybrids had limited sales when they were introduced to U.S. consumers in 2000. But sales have grown steadily, with nearly 269,000 hybrid vehicles sold in 2011.15 Early sales of today’s plug-in EVs have met or exceeded those of the Prius,16 suggesting that EVs have equal potential for success.17 The modern EV market started in the mid-2000s with just a few high-priced models from startup auto manufactures before Chevrolet and Nissan entered the market with the Volt and the Leaf, respectively.18 By the end of 2012, 13 EV models were available in the U.S. market with another 14 expected to be rolled-out by 2014.19

EVs will have to clear multiple hurdles before they capture a substantial share of the market. The greatest challenge to EV deployment is cost. Even with a federal tax credit of up to $7,500, today’s EVs still have a higher sticker price than comparable combustion engine models.20 This price disparity can be traced almost entirely to the battery, which comprises 35-45% of the total cost of an EV.21 Some manufacturers have begun leasing batteries separately from the vehicle, which could make EVs a more affordable option for American drivers.22 But this type of financing mechanism is unlikely to become widespread in the U.S. without additional data on EV usage and residual battery value.

Even as EVs decrease in price, Americans will need to be confident that an electric vehicle can meet their transportation needs before they are willing to purchase one. For instance, potential EV purchasers commonly express a desire for an enhanced network of public chargers (to supplement home charging) before they could be convinced to buy an EV.23 But there are not enough EVs within most cities or regions to support investment in charging infrastructure, creating a classic “chicken and egg” problem.

Implementation

To accelerate the deployment of EVs, federal policy should be used to lower the upfront cost of vehicles and increase the availability of charging infrastructure.

Expand Eligibility for Vehicle Loan Program

Congress should authorize the Advanced Technology Vehicle Manufacturing program (ATVM) to provide loans or loan guarantees to a wider array of technologies that could help the program meet its ultimate goals, including those that would accelerate the deployment of EVs.24 For instance, Congress should extend eligibility to include domestically manufactured EV chargers and lightweight materials that could help increase EV range.25

Require Agencies to Consider Commercial EV Leases

To ensure that federal offices are aware of economical EV leasing options, the General Services Agency (GSA) should require inclusion of commercial EV leases in the life cycle cost analysis for any applicable vehicle acquisition application.26 GSA should consult relevant automakers to identify cooperative activities that could make this process more efficient for applicants and procurement officials.27

Create a Pilot Program for EV Battery Leasing and Repurposing

GSA should issue a request for proposals for a partnership that would allow the government to lease batteries for EVs within the federal fleet. If Congress expanded the program’s authority, ATVM could be used to guarantee the resale value of these batteries. This would lower the cost of financing for the battery lease and ultimately lower the price paid by the government. Guaranteeing the batteries’ value could also help to secure a partner willing to purchase them after the lease expires. This program would provide substantial data on battery performance and value, the potential resale market, and the feasibility of additional battery leasing by the federal government.

A plug-in hybrid electric vehicle uses both an internal combustion engine and an electric motor (powered by a battery) for propulsion. The battery can be charged by plugging the vehicle into a source of electric power. See United States, Department of Energy, Energy Information Administration, “Hybrid and Plug-In Electric Vehicles,” May 31, 2013. Accessed May 31, 2013. Available at: http://www.afdc.energy.gov/vehicles/electric.html.

John Voelcker, “No, the electric car is not a failure,” The Christian Science Monitor, October 17, 2012. Accessed May 31, 2013. Available at: http://www.csmonitor.com/Business/In-Gear/2012/1017/No-the-electric-car-is-not-a-failure.

Expanded eligibility of the ATVM program could also include the manufacture of alternative fuel light and medium-duty trucks and their components, as well as lightweight vehicle materials. It could also include fueling infrastructure for other advanced vehicle fuels such as E85 and liquefied natural gas.

GSA is able to lease an EV to a federal agency, but it must include the full purchase price of the vehicle in the lease payments, making them less competitive with ICE alternatives. In contrast, some private sector lessors are able discount the upfront cost of the vehicle and can offer lower monthly payments.

Federal agencies are already authorized to enter non-GSA leases, but this often requires additional time and administrative effort. This can make commercial leasing less appealing than leasing through GSA, especially given current staffing constraints at federal agencies. See Erin Sembach, Chief of Staff, Office of Motor Vehicle Management, Telephone Interview, Interview by Ryan Fitzpatrick, Third Way, May 2013.

Implementation

How to Use the PowerBook

The PowerBook is a menu of á la carte options, not a blueprint that requires every element to hold it together. It is designed to provide federal policymakers and regulators with a selection of policy ideas to help solve specific challenges in how our nation produces, transports, and consumes energy.

SECTORS

The PowerBook is divided into five economic sectors: power, transmission, buildings and efficiency, industry, and transportation. Each sector includes multiple components, which are specific elements of that sector that require some policy change. Components that impact multiple sectors, such as clean energy finance or regulatory reform, are included in a sixth cross-sector section.

COMPONENTS

Each component has three parts: a short overview, an analysis of the challenges and opportunities for energy, employment, and the environment, and an implementation section that outlines specific actions that Congress, the administration, or the independent regulatory agencies can take. The policy recommendations in the implementation section are intended to serve as frameworks for more detailed legislation or regulatory reform proposals.

The components in the PowerBook reflect the input from a broad group of business leaders, policymakers, analysts, and academics. We will update them regularly to add new policy ideas, revise existing proposals, and reflect progress made in Congress or through the regulatory process. We invite readers to provide us suggestions to build upon the proposals in our components or new policies we should consider adding. Please send us your comments via the contact page.

OUR ANALYSIS

The PowerBook provides both pragmatic ideas to move America toward cleaner energy and data showing the potential impacts that these policies could have on our energy systems and economy. By combining several datasets, from economy-wide to industry-specific, we have developed a basic methodology for each component to estimate the effects these policies would have on CO2, conventional pollutants, and domestic energy needs. While future, independent modeling will provide higher accuracy, the current metrics offer a general barometer of impact and a way to compare the effects of various components.